Total Cost of Your Degree

If you want to know the true cost of education, utilize the concept of TCO (Total Cost of Ownership). Companies use TCO to make investment decisions. But isn’t education an investment? Why not apply the tenets of TCO to earning a college or graduate degree?

When companies make decisions about their investments they want to know how much it is going to cost. Calculating TCO in a business sense can mean looking at the costs of equipment for example. It also means accounting for projected costs and hidden costs. There are many hidden and ongoing costs that frequently are not considered when a project is originally proposed; and education is indeed a project-related venture.

TCO was developed in the 1980s by Gartner, a research firm to determine the cost of owning a personal computer. TCO has been widely used in the IT industry as a result. But if TCO considers direct and indirect costs incurred throughout the life cycle of an asset along with its operation, maintenance, and retirement, it can just as easily be applied in the very same manner to determining the true cost of ownership (TCO) of an education.

Calculating TCO in Education

The Gartner TCO model utilizes two major categories to organize costs: 1) direct costs and 2) indirect costs. This should be expanded the three major areas for calculation: 1) direct costs, 2) indirect costs, and 3) projected costs. Direct costs cover the visible support related investment. Indirect costs are less visible and they are spread out over the life of the undertaking.

Downtime might be an indirect cost for instance. Projected costs are not visible, but they are just as crucial to your TCO calculation in education. This area accounts for the cost of not putting your degree to good use along the way and in the future, a concept that is very subjective and explorative. But it enables you to enjoy the best outcome in your education. It can help keep you motivated if you have a projected use for your degree. Having served as an educator for several years, I have noted that we must calculate TCO in three major categories: 1) financial, 2) emotional, and 3) administrational.

1) Financial

This area accounts for all of the financial investment you will make to accomplish your educational endeavor such as the cost in terms of hardware, software, equipment, space, tuition, and anything else you believe you will need on a financial level. This area is easy to calculate. It involves “direct” costs. You can see in dollars and cents the cost of material items.

2) Emotional

This area accounts for all of the emotions involved in earning a degree such as from personal hardships, strain on relationships, endless hours spent on homework that can drain mental resources, and anything else you believe you will need to devote on an emotional level. This area is not as easy to calculate. It involves “indirect” costs. You cannot see a monetary value here, but there is a cost if there is emotional expenditure.

3) Administrational

This area accounts for all of the administration involved in earning a degree such as organizing your workspace, keeping records, producing coursework, and anything else you believe you will need on an administrational level. This area is not easy to calculate either. It involves “indirect” costs as well. But you can calculate costs in terms of time spent administrating your degree program from beginning to end.

Projected Costs and ROI in Education

We've addressed direct and indirect costs, but what about projected costs? This is where it gets tricky, but not impossible to calculate. For instance if you analyze the cost of not using your degree, you can easily imagine the loss of a higher paying job for instance. To scope this area of projected costs a bit more, take some time to examine some intangible costs. For those who earn a doctorate for example, there could be a loss of friends who do not relate to you any longer. This is a cost you may not be able to project, let alone be aware of it.

Estimating projected costs associated with earning the degree is the place to calculate the ROI (return on investment) in education. Education should be added to the investment side of the ROI equation as part of TCO. That is, the ROI of the costs should be considered in the context of the overall education investment. The ROI equation is ROI = (Net Benefits - Investment)/Investment. Take a closer look at the components that help you to develop the investment and benefits, which reveals drivers that are specific to education.

To calculate ROI, determine what percentage of the benefit outcome is directly due to earning a degree. This can be a highly subjective guess, based on your personal value system. It helps to establish tangible points for your consideration. List all of the affects of earning the degree as well as ways holding the degree can further your self-worth. The idea is to establish the value of knowledge transfer to you and what is the cost of not fully utilizing the gain.

Regardless of how you apply TCO in education, you should do it in order to realize what is truly at stake in a learning venture. If you go into it with eyes wide open, you will not be taken by surprise. Chances are you will be better prepared and able to maintain productivity throughout the venture because you have taken the time to evaluate your personal TCO in education.

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